Brazil's worsening financial situation will require very careful fiscal policies in Ireland, the governor of the Central Bank, Mr Maurice O'Connell, has warned.

Amid fears that Brazil is on the brink of an Asian-type economic collapse, Mr O'Connell said that neither the introduction of the euro nor Ireland's economic boom could protect the economy here from potential dangers.

He told an economic conference at University College Cork that the economy could sustain growth of between 4 and 5 per cent into the 21st century. But he added that, in an open economy like that of Ireland, it was vital to remain competitive. Taxation policy and curbs on public expenditure were two measures that would be essential in this regard. Others were the control of inflation and moves to control the flow of capital.

The Irish economy, he said, would have to remain flexible so as to be capable of responding to economic trends elsewhere. And economic planners would have to acknowledge that upswings in a country's fortunes were often followed by downturns.